Garuda's new boss to limit operations, renegotiate debt

JAKARTA (JP): National flag carrier Garuda Indonesia's newly appointed president Robby Djohan announced yesterday a massive restructuring plan to lift the ailing airline out of its financial crisis.

Robby said he would downsize operations and asked foreign creditors for a postponement of debt payments to boost efficiency and reduce the airline's financial burden.

"My priority is to restructure the organization," said the former president of Bank Niaga.

The sharp depreciation of the rupiah against the U.S. dollar has dealt a huge blow to the airline industry, in which about 80 percent of operational costs are in dollars.

Robby has yet to decide how many airplanes to shed, but indicated that 30 might be sufficient in the current sluggish market conditions.

"What is important is to achieve efficency because we have to be a market-oriented operation," he said.

Garuda currently operates 57 aircraft, and is planning to return six of its leased planes.

"Downsizing the company will be a difficult job," Robby said, but added that there would be no layoffs, stressing that employees would be transferred to Garuda's subsidiaries and other operations which have links with the the airlines.

He also said that he would negotiate with foreign creditors to postpone the debt repayment.

"But we're committed to paying our debts," he said.

Garuda has debts of US$200 million, half of which are due to be repaid this year.

State Minister of the Empowerment of State Enterprises Tanri Abeng said last week that Garuda was in a critical condition, stressing the need for both management and financial restructuring.

In addition to a new president, Garuda also got three new directors.

"The new management team will try to rebuild the image of Garuda as a very competitive airline, reliable and safe," Robby said.

He said that he would rid the company of corruption and nepotism including reviewing past contracts which were signed without being based on business considerations.

"You can't work in an organization branded with corruption and nepotism," he said.

After being pressured by its employees, Garuda announced last week that it would sever links with companies linked to the family of former president Soeharto.

Robby said Garuda could no longer operate as it had in the past, because the government could not afford to finance a bail out due to the current economic crisis.

"Garuda must now be managed with its own resources," he said, pointing out that the management would motivate its staff to be more disciplined.

He said that foreign strategic partners which have cash and technology were welcome to invest in the airline.

Former Garuda president Soepandi he was confident that Robby could turn around the airline from its current troubles.

Indonesia's five operating commercial airlines, including Garuda, announced last week that they plan to combine their resources and unite their domestic services to survive the deepening economic crisis. (rei)